Friday, July 18, 2008

Why Study the History of Economic Ideas?

Mike McBride, a guest blogger at asks (18 July): “how important is it to know your discipline’s history?” HERE:

If we base our answer on the material covered in the first year of core courses in economics graduate programs, then it is would seem to not be very important in my discipline. Yet, this is an unfair way to approach the question. The next question should really be: “Important for what?”

Let’s try a different route. It does not seem very important to know the grand history of your discipline to be a contributing member because your contributions are made at the research frontier. You only need to know the other relevant literature also at the frontier. (Or maybe the cynic would say it matters a little for establishing credibility with reviewers who want you to at give at least cursory mention to famous papers/books in your introduction.)

I remember learning this lesson as an undergraduate when I saw the list of references in one of my professor’s papers. I naively asked him how he could have neglected to cite Adam Smith’s Wealth of Nations. He chuckled and said that he’d never cited Smith in any of his papers. I was shocked. I wondered how it was possible to do economics without relating your work to Adam Smith.
Although I left this sweet innocence behind years ago, I often find myself revisiting my discipline’s history. Doing so gives me insightful perspective into how my own work fits into the overall discipline. It also aids in teaching because students love stories; if you can teach them a little history behind ideas and controversies, they are more excited about the material. But even better than these practical reasons is the thrill of encountering the evolution and synthesis of ideas. Living in the world of ideas is one of the best perks of our profession.
How important is it to you to know your discipline’s history? In what ways?”


I posted this short reply direct to Orgtheory:

‘The problem with citing Adam Smith in economics papers today is not that he had nothing to say of interest to today's researchers but what they do say about his work is almost always wrong; sometimes the citation does not correspond to the modern- day context even if the words used are similar (e.g., transposing Smith's analysis of the Royal Chartered Joint-Stock companies as if it applies to modern corporations) when the context is completely different.

There is also the misapplication of an isolated metaphor of 'an invisible hand' into a 'grand theory', a 'paradigm' even, when Smith used it simply as a metaphor on two occasions, once in Moral Sentiments and once only in Wealth Of Nations (his reference in his 'juvenile' 'History of Astronomy' referred to the real beliefs of pagan religions that Jupiter's hand cast thunderbolts at the enemies of Rome).

Smith did not refer to markets when using the metaphor in Book IV of WN (markets are exhaustively discussed in Book I and II without mentioning the metaphor). Those economists interested in following up this example amy contact me for a copy of my recent paper: 'Adam Smith and the Invisible Hand: from metaphor to myth' (gavinATnegwebDOTcom).

The professor who 'never cited Adam Smith' most probably had never really read him because he didn't need to. Smith wrote about the real economy, almost as an inter-disciplinary treatment; professors today write about an imaginary economy absent human beings, almost entirely imaginary in abstract mathematics and not the real world. That is why there is hardly any agreement on economic management or policy among the profession. Governments and those who advise them hire economists who fit their politics, as they did in Smith's day.’

There is an active core of economists interested in the history of ideas in the discipline. In the North America, there is the History of Economics Society, which can be contacted at:
Or direct to the Treasurer:

HES holds an Annual meeting, this year’s was in York University, Toronto (last year’s was in GMU, Fairfax, Virginia). You can see my reports of both that I attended by scolling through Lost Legacy. It also publishes a scholarly journal, The History of Economic Thought.

There are active sister societies of HES in Europe and Australia. For lively debates and research that informs modern debates, these are excellent entry points for young scholars and those hardened professionals of vintage ages.



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